Will Loan Growth Benefit Regions Financial (RF) Q2 Earnings?
Regions FinancialRF is scheduled to report second-quarter 2018 results on Jul 20, before the opening bell. The bank's results are estimated to reflect year-over-year rise in both revenues and earnings.
Also, the company has a decent earnings surprise history. It topped earnings in three of the trailing four quarters, with an average positive earnings surprise of 5.2%.
This Birmingham, AL-based company's first-quarter 2018 earnings outpaced the Zacks Consensus Estimate and compared favorably with the prior-year quarter's earnings as well. Easing margin pressure and higher revenues were the positive factors. Moreover, credit quality recorded significant improvement. However, lower loans and deposits balance were the undermining factors. In addition, expenses escalated in the quarter.
Further, the Zacks Consensus Estimate for second-quarter earnings remained unchanged at 33 cents over the last 60 days, reflecting a year-over-year improvement of nearly 32%. The Zacks Consensus Estimate for sales of $1.45 billion indicates around 2.7% growth from the prior-year quarter.
In addition, Regions' results are expected to reflect a marginal rise, on a sequential basis, in average interest-earning assets as the Zacks Consensus Estimate for the to-be-reported quarter is $108.6 billion.
Notably, post Q1 earnings, company's share price declined. For the three-month period ended Jun 30, 2018, the stock lost around 4.3%.
Will the upcoming earnings release give a boost to Regions' stock? This depends largely on whether or not the firm is able to post a beat in the second quarter.
Regions Financial Corporation Price and EPS Surprise
Factors to Influence Q2 Results
Loan Growth: Per the Fed's latest data , loans are expected to reflect slight improvement, on a sequential basis, for the quarter to be reported. Particularly, weakness in revolving home equity loans might have offset growth in commercial and industrial (C&I), and consumer loans to some extent.
In addition, management's expectations of loan and deposit growth in 2018 will likely be reflected in this quarter. The bank projects average loans to reflect year-over-year growth in low-single digits, while average deposits will likely indicate rise in low-single digits, excluding brokered and Wealth Institutional Services deposits.
Modest Rise in Net Interest Income (NII): A modest increase in lending is expected to have led to improvement in NII. A rise in interest rates will provide some support despite flattening of the yield curve in the second quarter. Notably, management's projections of the 2018 NII and other financing income's rise of 4-6% are likely to show impact in the second quarter.
Non Interest Income Might Escalate: The persistent decline in non-interest income has weighed on the top line for the last few years. Equity and fixed income trading revenues are expected to be flat on a year-over-year basis. Moreover, the trend of consumer spending was strong during the quarter, which will likely have boosted the bank's credit and debit card revenues. However, poor mortgage banking revenues during the quarter are anticipated to have offset the positives to some extent. Nevertheless, adjusted non-interest income is estimated to improve 3-6% in 2018.
Notably, the Zacks Consensus Estimate for capital market revenues is estimated to decline 6.8% sequentially to $46.6 million, while commercial credit fee income is projected to increase 3.5% to $17.6 million.
Expenses Might Rise Slightly: Regions' bottom line is expected to reflect the decent support of its efficient expense management during the quarter. Notably, the company is on track for a $400-million expense reduction by 2019. While investing in revenue-generating areas, the company intends to keep expenses stable.
Here is what our quantitative model predicts:
Regions does not have the right combination of two key ingredients - a positive Earnings ESP and Zacks Rank #3 (Hold) or higher - for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks ESP: The Earnings ESP is currently pegged at -0.24%.
Zacks Rank: Regions carries a Zacks Rank of 3, which increases the predictive power of ESP. But we also need to have a positive ESP to be confident of a positive earnings surprise.
Stocks That Warrant a Look
Here are some other stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.
State Street Corporation STT is slated to release results on Jul 20. The company has an Earnings ESP of +0.28% and carries a Zacks Rank of 3. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
The Earnings ESP for Cullen/Frost Bankers, Inc. CFR is +0.56% and it also carries a Zacks Rank of 2 (Buy). The company is scheduled to report quarterly numbers on Jul 26.
SunTrust Banks, Inc. STI has an Earnings ESP of +0.31% and holds a Zacks Rank of 2. It is scheduled to report results on Jul 20.
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